Agricultural Property Tax Relief: Tax Credits, Tax Rates, and Land Values

Anderson, John E.; Bunch, Howard C.
February 1989
Land Economics;Feb89, Vol. 65 Issue 1, p13
Academic Journal
The study will focus on the determinants of property tax credit levels, property tax rates, and land values centered around agricultural property tax relief. In particular, the model investigates the capitalization of property taxes and property tax credits into land values. Using a pooled cross section time series data set drawn from the Michigan program, the capitalization effect of agricultural property tax relief is estimated. Since participants receive combined tax credits amounting to 80-90 percent of their taxes on average (depending on the year), the potential effect on land values is sizable. Capitalization effects are estimated in the context of a three-equation system which specifies that tax credits, tax rates, and land values are jointly determined. Based on the theoretical model developed to analyze the capitalization effect of agricultural property tax relief, farm income, development opportunities, the tax rate, and other factors are expected to be influential in explaining the magnitude of the capitalization effect.


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